First survey of the year released: Central Bank's dollar, inflation, and interest rate expectations revealed

The Central Bank of the Republic of Türkiye (TCMB) has released its January 2025 Market Participants Survey. The survey was answered by 68 participants consisting of representatives from the real and financial sectors, and the results were evaluated by aggregating the participants' responses.

The participants' current year-end consumer inflation (CPI) expectation for this survey period was 27.05 percent. While the 12-month ahead CPI expectation was 27.07 percent in the previous survey period, it became 25.38 percent in this survey period. The 24-month ahead CPI expectation was 18.47 percent and 17.72 percent in the same survey periods, respectively.

12-MONTH AHEAD INFLATION EXPECTATIONS

In the January 2025 survey period, when the participants' probability estimates for 12 months ahead were evaluated, it was projected that the CPI would increase by an average of 21.00 - 23.99 percent with a 20.76 percent probability, 24.00 - 26.99 percent with a 54.75 percent probability, and 27.00 - 29.99 percent with a 15.34 percent probability.

According to the evaluation based on point estimates in the same survey period, it was observed that 12.90 percent of the participants' expectations were in the 21.00 - 23.99 percent range, 56.45 percent were in the 24.00 - 26.99 percent range, and 17.74 percent were in the 27.00 - 29.99 percent range.

24-MONTH AHEAD INFLATION EXPECTATIONS

In the January 2025 survey period, when the participants' probability estimates for 24 months ahead were evaluated, it was projected that the CPI would increase by an average of 13.00 - 15.99 percent with a 20.39 percent probability, 16.00 - 18.99 percent with a 40.07 percent probability, and 19.00 - 21.99 percent with a 28.22 percent probability.

According to the evaluation based on point estimates in the same survey period, when 24-month ahead CPI inflation expectations were evaluated, it was observed that 23.21 percent of the participants' expectations were in the 13.00 - 15.99 percent range, 39.29 percent were in the 16.00 - 18.99 percent range, and 23.21 percent were in the 19.00 - 21.99 percent range.

SIGNAL FOR INTEREST RATE CUT FROM THE CENTRAL BANK

The participants' current month-end overnight interest rate expectation in the BIST Repo and Reverse-Repo Market was 48.59 percent in the previous survey period, while it was 45.00 percent in this survey period. The TCMB one-week repo auction interest rate expectation for the end of the current month was 48.51 percent in the previous survey period, while it was 45.00 percent in this survey period.

Thus, the Central Bank gave a signal for an interest rate cut ahead of the Monetary Policy Committee (MPC) meeting to be held on January 3, 2025.

On the other hand, the TCMB had lowered the interest rate from 50 percent to 47.5 percent in December.

EXCHANGE RATE EXPECTATIONS

The participants' current year-end exchange rate (US Dollar/TL) expectation was 43.03 TL in this survey period. The 12-month ahead exchange rate expectation was 43.23 TL in the previous survey period, while it was 43.81 TL in this survey period.

GDP GROWTH EXPECTATIONS

The participants' GDP growth expectation for 2025 was 3.1 percent in this survey period, just as it was in the previous survey period. The GDP growth expectation for 2026 was 3.9 percent in this survey period.

News Source: İHA